INCOME TAXES

12 Months Ended

Sep. 30, 2021

INCOME TAXES

INCOME TAXES

NOTE J – INCOME TAXES

The income tax provision (benefit) for the fiscal years ended September 30, 2021 and 2020 consists of the following:

	2021		2020
Federal:
Current	$	—	$	—
Deferred		(1,423,000)		(2,914,000)
		(1,423,000)		(2,914,000)
State and local:
Current		—		—
Deferred		(26,000)		(591,000)
		(26,000)		(591,000)
Foreign:
Current		—		—
Deferred		18,000		—
		—		—
Change in valuation allowance		1,431,000		3,505,000
Income tax provision (benefit)	$	—	$	—

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory rate to losses before income tax expense for the years ended September 30, 2021 and 2020 as follows:

	2021		2020
Statutory federal income tax rate	21.00	%	21.00	%
Statutory state and local income tax rate (1%, as of September 30, 2020 and 2019), net of federal benefit	1.52	%	2.26	%
Stock based compensation	(11.54)	%	(1.60)	%
Other permanent differences	(0.56)	%	3.83	%
Change in deferred tax rate	(0.41)	%	1.66	%
Change in valuation allowance	(10.01)	%	(27.15)	%
Effective tax rate	0.00	%	0.00	%

NOTE J– INCOME TAXES, continued

Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:

	September 30,
	2021		2020
Deferred tax assets (liabilities):
Stock based compensation	$	650,000	$	2,120,000
Depreciation and amortization		247,000		232,000
Net operating loss carry forward		20,115,000		17,499,000
Impairment of intangibles		187,000		—
Tax credits		1,566,000		1,227,000
Other		99,000		355,000
Less: valuation allowance		(22,864,000)		(21,433,000)
Net deferred tax asset	$	—	$	—

As of September 30, 2021, the Company has approximately $84,283,000 of Federal and $35,836,000 of State net operating loss “NOL” carryforwards available which begin to expire after 2022. The Federal NOLs generated in tax years beginning after December 31, 2017 have no expiration period due to the Tax Cuts and Jobs Act that was enacted in 2017. Pursuant to Internal Revenue Code Section 382, the Company’s ability to utilize the NOLs is subject to certain limitations due to changes in stock ownership in prior years. The annual limitation ranges between $94,000 and $1,103,000 and any unused amounts can be carried forward to subsequent years.

The Company has provided a full valuation allowance against all of the net deferred tax assets based on management’s determination that it is more likely than not that the net deferred tax assets will not be realized in the future. The valuation allowance increased by $1,431,000.

The Company has Federal research and development credits of approximately $1,104,000 that will begin to expire after 2034. The Company also has state investment tax credits of $416,000 that will begin to expire after 2029.